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Long-term care insurance

03/09/2018

“To a certain extent, your financial options for paying for the expenses of dementia will depend on the age of your loved one and whether he is still working.”

After the reality sinks in that your loved one does, in fact, have Alzheimer’s or some other form of dementia, you discover that you now have more to think about than the diagnosis. It may have taken several years to get the diagnosis, while you worried about the well-being of your aging relative. Now that you know what your family is facing, the practical concerns kick in, and you need to develop a strategy for dealing with this situation. One of your primary questions is how to pay for the costs of care for Alzheimer’s or other dementia.

Having a loved one with a significant special need, like Alzheimer’s or another form of dementia, can be life-changing. You need to make sure someone is watching out for her twenty-four hours a day, seven days a week. If you have a huge family nearby, you might be able to take shifts for a while. However, in time you will likely need to hire outside help or assist your loved one to move into residential care. Your loved one with dementia will face many other expenses. Here are some of the typical expenses for a person with dementia:

Home modifications for the safety and comfort of the senior with dementia.

Drugs for the management of dementia and any other medical issues.

Tracking devices and monthly monitoring fees can be a true lifesaver for finding a dementia patient who has wandered away from home or residential care.

Inpatient treatment for short-term medical needs.

Long-term care, ideally in a residential memory-care facility.

How to Pay for These Costs

To a certain extent, your financial options for paying for the expenses of dementia will depend on the age of your loved one and whether he is still working. Some people in the early stages of dementia manage to maintain employment. Here are six sources of funding for the expenses that can accompany dementia:

Insurance. If your loved one is age 65 or older, Medicare may pick up some of her medical expenses for dementia care. If she is still working and under 65, her group employee health plan is an option. If she is under 65 but does not have group employee health insurance, check to see if she has a private health insurance plan.

Employee benefits. People who are still working might have a menu of employee benefits that can help cover some expenses of dementia. Check with the human resources or employee benefits department about your loved one’s eligibility for paid sick leave or short-term disability benefits. A flexible spending account can also pay for some costs.

Retirement benefits. If your loved one is retired, check to see what retirement benefits she can use. There may be more than one of these retirement accounts: IRAs, annuities, 401(k)s, 403(b)s, and pensions.

Personal assets. Some items might not have outside sources of funding. For these things, your loved one might have to spend personal assets.

Government assistance. In addition to Medicare, many other public programs can assist with income, long-term care expenses, and other costs. If your loved one is under 65, Social Security Disability Insurance (SSDI) might send him a monthly check. Check to see if he qualifies for Supplemental Security Income (SSI), Medicaid, or veterans’ benefits. Sometimes a family member can get paid for serving as a caregiver for your loved one.

Community support services. Local community organizations can offer free or low-cost home-delivered meals, transportation, support groups, respite care, and other services for your loved one and her family. Check with your local Alzheimer’s Association chapter or use the association’s Community Resource Finder to locate services in your area.

Every state has different laws and programs, so be sure to talk with an elder law attorney near you.

12/20/2017

“To pay for nursing home costs beyond 100 or 190 days, many people turn to Medicaid, veterans benefits, relocation to a less expensive part of the country, long-term care insurance or reverse mortgages.”

You cannot count on Medicare paying for much, if you need nursing home care. Medicare can pay for skilled nursing care for a short period of time, but not for ongoing residential services. Medicare will also not pay for a nursing home admission for a chronic or long-term condition for which there is no cure. It will pay for you to recuperate (convalesce) briefly from an illness or injury. As you strategize for your financial future, you need to answer the question, How can I plan for nursing home costs?

Medicare will pick up the tab for 100% of the first 20 days and 80% for the next 80 days. If you have Medicare Supplement insurance, it will pay the other 20% for days 21 through 100. Neither Medicare nor Medicaid Supplement insurance will pay anything after 100 days, unless you are in a psychiatric hospital that is also a nursing home and you are there for a psychiatric condition. In that situation, Medicare will help pay up to 190 days.

Options to Pay for Nursing Home Care

To pay for nursing home costs beyond 100 or 190 days, many people turn to Medicaid, veterans’ benefits, relocation to a less expensive part of the country, long-term care insurance or reverse mortgages. You should consider different factors for each of these options.

Medicaid pays for more nursing home costs than any other agency or organization – around half of the total nursing home costs in America. Not everyone can meet the stringent financial requirements to qualify for Medicaid. You must be low income and have few assets to be eligible. Medicaid excludes many common assets, like your home, from counting toward the asset limit. There are ways to shift your income and protect your assets through estate planning products like trusts, but you should talk with an elder law attorney to find out your best options.

If you are a veteran or the spouse of a veteran, you may qualify to live in a state Veterans Administration (VA) nursing home. Every state and each nursing home has different rules for eligibility, so you will have to do your homework to find one that meets your needs and that is available for you. If you receive Aid and Attendance benefits from the VA, you cannot also live in a state VA nursing home.

Although it can be difficult to uproot yourself if your medical condition requires nursing home care, where you live can make a tremendous difference in the cost of nursing home care. The average cost of nursing home varies from a low of $147 a day in Oklahoma to $364 a day in New York to a stunning $800 a day in Alaska. The national average is $235 a day. With this variation in the expense, relocation can make your dollars go further.

Long-term care insurance is expensive, and as you get older, the premiums continue to rise. You are trusting that the company will still be in business decades down the road when you need them. At least one major long-term care insurance company liquidated in 2017 under court order. If you never need long-term care, you will get no benefit from all those premiums you paid.

Reverse mortgages and other financial products can offer more flexibility than long-term care insurance at a lower cost, but these products can also have downsides. Planning for nursing home care costs requires the consideration of multiple factors. The laws are different in every state, so you should talk with an elder law attorney in your area to decide on the best plan for you.

11/02/2017

“Some hybrid packages provide fixed income through annuities, cover nursing home costs out of cash retained in the product and pay a death benefit through life insurance components.”

Since Penn Treaty long-term care insurance went out of business, leaving Penn’s business partners holding the bag for some costs of claims and making seniors worried about their futures, people are even more hesitant to buy long-term care insurance than before. Historically, the high cost of long-term care insurance premiums has kept many people from buying this coverage. It now appears that after paying the high premiums for years, long-term care insurance might not be there when you need it.

There are relatively new alternatives to long-term care insurance. If you are exploring hybrid long-term care options, you may have questions about what they are and how they work. Kiplinger advises these options come in many forms.

With this variation, you pay one up-front premium or a series of premiums with set prices. There are no future premium increases. While the number of these hybrid insurance products sold in 2015 was up by 37 percent over 2014, sales of traditional long-term care policies fell about 20 percent during the same time. If you never need long-term care, you will still get a financial benefit from the hybrid policy through the death benefit. Standard long-term care insurance can only pay nursing home expenses. Therefore, if you do not use it, you lose it.

Growth Rate of Cash Value

Many hybrid products also grow in cash value. The current growth rate is about 2 percent, which is good compared to today’s bank rates. However, if short term returns increase considerably, you will lose out on the potential return you could get in the market for your money. You must invest at least $50,000 to $75,000, if you want coverage that will provide sufficient long-term care benefits. Taking a distribution from the annuity or life insurance to pay for nursing home costs can be tax-free sometimes, which is likely better than paying for a nursing home with your after-tax savings.

Wealth Management

The New York Times reports that hybrid products can be an essential component of your wealth-management plan, to prevent long-term costs from depleting your life savings, while providing flexibility. Some combinations include long-term care coverage with an annuity, instead of a universal life policy. Some hybrid packages provide fixed income through annuities, cover nursing home costs out of cash retained in the product and pay a death benefit through life insurance components.

Best Candidates for Hybrid Long-Term Care Products

Experts warn these hybrid financial products are not the best option for everyone. If you have less than $500,000 in assets, you may prefer to spend down your assets over time to qualify for Medicaid to pay your long-term care expenses. If you have more than $2 million in assets, you can pay nursing home expenses out of pocket. Between $500,000 and $2 million in assets is the sweet spot, at which buying a hybrid long-term care product might make sense. Talk with your financial advisor about what is best for your situation.

This posting discusses general law. Talk with an elder law attorney in your area to learn the laws in your state. Also consult a financial advisor and a tax expert.

Some experts suggest that if you want to maximize the benefits you receive from a long-term care insurance policy, buy the coverage for the wife, not the husband. This is because statistically, women tend to live longer than men in America. Like many statistics, however, this is a gross generalization that may not relate to your situation.

Look at each spouse’s health and lifestyle, including nutrition and exercise. Consider the longevity of each spouse’s family. Think about which spouse is more likely to need nursing home care. One spouse might be more likely to live longer at home, while the other spouse may be more likely to need nursing home care. Many people live independently, well into their 90s and beyond.

Shared Policy

Some long term care policies allow spouses to share one policy, splitting the benefits between them. If they have ten years of coverage, for example, one spouse could use three years, and the other spouse could use seven.

The shared policy option may be more than adequate, despite what some high-pressure insurance salespeople may tell you. The majority of seniors never need to move into a nursing home. Of those who spend time in a nursing home, Kiplinger reports that only half of the men and about 40 percent of the women ever stay longer than three months. Experts debate about whether the benefits people receive from long-term care policies justify the high premiums.

“Group” Discount

Check to see if the long-term care insurance company gives a substantial discount, if both you and your spouse buy policies. It might not cost twice as much to insure both of you, as it does to cover one of you.

Hybrid Policies

A relatively new option is a hybrid combination of life insurance with long-term coverage. These products can be less expensive than traditional long-term coverage, and provide a death benefit besides nursing home coverage.

Options to Long-Term Care Insurance

Explore alternatives to nursing homes, such as caregivers in your home. State and federal funds will pay for some options that help seniors stay in their homes if possible. The cost of living in an assisted living center can also be far less expensive than the 24/7 skilled nursing care of a nursing home. If you only need a small to moderate amount of help with daily living or medical issues, you probably need not live in a costly nursing home.

If you have limited assets and low income, Medicaid can pay for your nursing home expenses and protect assets and income for your spouse. Some experts advise you to skip long-term care insurance altogether, if your assets are less than $500,000, because you can spend down your assets and become Medicaid-eligible.

This posting discusses the general law. The laws are different in every state, so talk with an elder law attorney in your area.

10/14/2017

“People who have paid expensive insurance premiums faithfully for years, are left wondering what will happen to them if they need to move into long-term care one day in the future.”

A 2017 court order forced one of the largest long-term insurance companies in America, Penn Treaty, to liquidate because Penn does not have enough assets to pay anticipated future claims. People who have paid expensive insurance premiums faithfully for years, are left wondering what will happen to them, if they must move into long-term care one day . When such a large company goes under, there is usually a significant ripple effect. Experts warn Americans to beware the downfall of long-term care insurers.

Penn Treaty and the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) prepared answers to Frequently Asked Questions (FAQs) on the Penn Treaty website to address the understandable panic of the Penn Treaty long-term care policyholders. Some topics Penn and NOLHGA covered include:

What Happens to the Long-Term Care Policies After the Liquidation

Every state has a guarantee fund that protects policyholders when insurance companies go belly up. The guaranty association for your state will administer your long-term care policy and handle your claims. Some states place limits on your claims they will pay. These limits vary from state to state. Other states have no limitation on claims when a long-term insurer liquidates. Regardless of where you lived when you bought your long-term care policy, your limitations of coverage will be determined by the state where you lived when Penn Treaty liquidated. In Alabama the limit is $250,000.

You must Keep Paying Your Premiums

Even though it feels like they are forcing you to throw good money after bad, if you stop paying your premiums, they will cancel your policy and you will get no help from the guaranty association of your state. As if that were not enough bad news, Penn warns that the premiums may be “adjusted” later, which of course, means they can raise your payments.

The Demise of a Long-Term Care Insurer Can Hurt Other Companies

Long-term care insurance is a form of health insurance, so when the long-term care company folds, the health insurance company with whom they had a contract gets stuck with some bills. To recoup some of their losses, the health insurance companies then jack up their premiums.

Alternatives to Buying Long-Term Care Insurance

Although it is rare when a long-term insurer closes, Penn Treaty shows it can happen. Many people now wonder, if there are other options to help pay for nursing home care .

Some people recommend that you buy a hybrid form of asset-based long-term care funding by combining annuities and life insurance policies, so you will get a guaranteed amount of benefits you can use on whatever you want. Some long-term care policies only pay for the expenses of being in a nursing home or other long-term care facility. If you never need to live in a nursing home, you will get no benefit from the premiums you paid for the LTC policy.

Whether you choose long-term care insurance or something else, investigate the company carefully. The laws vary from state to state, so be sure you talk with an elder law attorney near you.

05/01/2017

“Compared to even a few decades ago, people today can expect to live longer and healthier lives. They can also expect their overall quality of life to improve as they age–if they have the resources to stay healthy.”

A recent Forbes article asks “You May Live Longer Than You Expect: Are You Prepared?” The article notes that, according to a survey of seniors conducted by the National Council on Aging, 80% of those contacted said they plan to age in their homes. Some 40% of the respondents believed that they’d need a child or grandchild to care for them at some point. About one-third said they didn’t know if their money would last through retirement, and some didn’t even have a financial plan.

There are several things you can do in preparation for a good quality of life as you age. First, begin as soon as possible, so you can take full advantage of resources that can help you have a longer, healthier life. You should start with financial planning. It is important to share your current financial situation and describe your goals for both before and after you retire. This will allow you to design a workable plan that will help you achieve those goals.

Next, look at legal and estate planning. Depending on your individual circumstances, your plan can be relatively simple or complex, but should be tailored to your needs and objectives. At a minimum, make sure that you:

Create an aging plan that will provide the funds to pay for long-term care costs. There are only four ways to pay these costs: self-funding, long-term care insurance, government long-term care benefits, or some combination of these sources.

Create a complete estate plan. That includes a Living Trust, a Living Will, Durable Powers of Attorney, Healthcare and HIPAA Power of Attorney, and estate planning letters;

Designate guardians for minors and dependents;

Create written instructions for locating important documents, like your insurance policies, bank accounts, and other financial assets;

Designate your retirement plan, 401(k), and IRA beneficiaries; and

Make funeral arrangements, whether pre-paid or pre-planned.

Your comprehensive estate plan should ensure that your assets are distributed how, when, and to whom you say. This can relieve loved ones of the stress and emotional impact of making difficult financial and medical decisions on your behalf, if you’re unable to do so because of incapacitation.

With your financial health in place, remember your physical health and well-being. Talk to your doctor and get moving. Advances in nutrition and healthcare make the chances of living a longer, healthier life much more realistic for many. With proper planning, your quality of life can improve in every aspect.

03/23/2017

The greatest unknown in retirement is your health. Two of the most critical investments that we can make now are to plan to cover uncertain costs and live healthy. Forbes’ article, “The Biggest Wild Card In Retirement And How To Deal With It,” notes that if a married couple retiring at age 65 wants to have 90% certainty that they can cover healthcare expenses in retirement (Medicare Part B and Part D premiums, MediGap premiums, and out-of-pocket drug expenses), they’ll need $265,000 (with high drug expenses upping it to $349,000). These numbers don’t include long-term care expenses. They can be as much as $10,000 a month.

Medicare won’t cover everything, so you’ll probably need MediGap coverage. You should also look out for Medicare premium surcharges, if your income is over $85,000 ($170,000 for joint filers). People say that “health” is the key to a happy retirement, but research shows that it’s also the biggest concern. Americans of all ages say that their top financial worry in retirement is that they or a loved one will have a costly health issue. Nonetheless, there’s a bit of a disconnect even among those who are aware of this cost. Healthcare costs are frequently missing in retirement planning, research says. Fewer than 15% of pre-retirees have ever attempted to estimate the amount of money they might need for health care and long-term care in retirement. Only 42% of pre-retirees have a health care directive that details the individual who’ll determine how medical care is carried out, if a spouse is unable to make decisions on their own.

There is some positive news. In a recent study, 91% of retirees said they’re willing to make healthier choices now to save money later, and 83% say they’ll review their health insurance plan options. With that in mind, there are some steps you can take right now. Starting a general retirement account can help cover extra health care costs. You should take full advantage of tax-advantaged retirement plans and up your savings. You should also investigate if your employer has any specialized tax-advantaged healthcare savings options.

Look into a HSA or FSA. If you have a high deductible health insurance plan, you can save in a tax-advantaged health savings account (HSA). If you don’t use the money for current out-of-pocket healthcare expenses, you can invest it and save it as a retirement healthcare fund. In addition, a Healthcare Flexible Spending Account (FSA) helps cut costs on current year healthcare expenses. Some plans allow you to carry over a $500 balance into the next plan year.

Long-term care insurance. Only 30% of people believe they’ll need long-term care, but it’s really more than double that number. Seven in ten will need it at some point in their lifetimes and on average, they will need it for approximately three years. If you don’t want to purchase long-term care insurance, you’ll need to be certain that you’ll have resources available, in case care is needed.

Talk to the whole family. Talking money still may be thought of as off-limits, but it shouldn’t be. About 70% of married pre-retirees haven’t discussed healthcare in retirement and how to pay for it with their spouses. The study also found 70% of Americans haven’t had serious conversations about net worth, long-term care, or wills and inheritance with their parents.